What Does It Mean When a House Is Contingent?

When a house is listed as “contingent,” it means an offer has been accepted, but the sale is not yet finalized. The transaction is dependent upon specific conditions being met by either the buyer or the seller. Until these requirements are satisfied, the contract remains conditional, providing protective measures for both parties.

Understanding Contingent Status

A contingent status signifies that a real estate contract has been signed, but its completion hinges on predefined criteria. These conditions are formally outlined within the purchase agreement, acting as safeguards for both the buyer and the seller. The property is effectively off the primary market, but it remains susceptible to cancellation if the agreed-upon conditions are not fulfilled within the stipulated timeframe. This period ensures that critical aspects of the transaction are thoroughly evaluated before the sale becomes binding.

These conditions protect the interests of both parties by allowing for an exit strategy if unforeseen issues arise. For instance, a buyer might need to secure financing, or a seller might need to resolve a property issue. The transaction progresses through this conditional phase, and only once all contingencies are successfully met and formally removed does the sale move closer to its final closing.

Common Conditions

Financing Contingency

One common condition is the financing contingency, which permits the buyer to withdraw from the contract without penalty if they cannot secure a mortgage loan. This clause protects their earnest money deposit if the loan application is denied. This contingency typically ranges from 30 to 60 days, allowing sufficient time for the mortgage application and underwriting process.

Appraisal Contingency

The appraisal contingency ensures the property’s appraised value meets or exceeds the agreed-upon purchase price. If the appraisal comes in lower, the buyer may renegotiate the price, pay the difference in cash, or exit the contract. This contingency typically has a duration of 7 to 20 days, providing time for a professional appraiser to assess the home’s market value.

Inspection Contingency

The inspection contingency allows the buyer to have the property professionally inspected for defects or issues. If significant problems are discovered, the buyer can request repairs, negotiate a price reduction, or cancel the deal and receive their earnest money back. This due diligence period usually spans 5 to 10 days, though it can extend up to 17 days in some agreements, providing a window for inspectors to assess the structure, systems, and overall condition of the home.

Sale of Buyer’s Home Contingency

A sale of buyer’s home contingency is common for buyers who need to sell their current residence to fund the new purchase. This condition provides a specified period, often ranging from 30 to 90 days, for the buyer to find a purchaser for their existing property. If the buyer’s home does not sell within this timeframe, they can terminate the contract without penalty. This offers flexibility but can introduce uncertainty for the seller.

For Prospective Buyers

When a prospective buyer encounters a contingent listing, it means an offer has been accepted, but the opportunity to purchase is not entirely closed. Buyers can often still view these properties and, in some cases, submit a backup offer. A backup offer becomes active if the initial contingent contract falls through, which can happen if any of the agreed-upon conditions are not met.

Submitting a backup offer provides a strategic advantage, positioning a buyer to immediately move forward if the primary deal fails. While under a backup agreement, the buyer typically retains the flexibility to pursue other properties. Should the initial contingent offer terminate, the backup offer automatically moves into primary position, at which point its own set of contingencies would typically activate.

For Sellers

For sellers, accepting a contingent offer can be a practical decision, especially if the offer is strong and the contingencies are common. While it means the property is not yet definitively sold, it secures a buyer’s commitment while necessary conditions are met. Sellers have responsibilities during this period, such as providing access for inspections and appraisals, and cooperating with the buyer’s efforts to fulfill their contingencies. The average time a home stays in contingent status is typically between 10 and 30 days.

If a buyer fails to meet a contingency deadline, the seller usually has options, including the ability to issue a “Notice to Perform.” This formal document provides the buyer with a short window to either remove the contingency or risk contract termination. Additionally, some contingent contracts include a “kick-out clause,” which allows the seller to continue marketing the property and accept a stronger offer. If a new offer is received, the original buyer is given a limited timeframe to remove their contingencies and proceed with the sale or allow the seller to accept the new offer.